October 5, 2011

Coalition to push for $1 a pack increase

The same people who pushed the "dime-a-drink" hike to the alcohol tax and the "dollar-a-pack" increase to the state tobacco tax are launching a new campaign: Another $1 increase to the cost of a pack of cigarettes.

The group is headed by Vincent DeMarco, includes AARP Maryland, MedChi and the NAACP among others. They plan lobby lawmakers next session to increase Maryland's rate to $3 a pack.

New York now has the highest tax rate on cigarettes in the country, at $4.35 a pack, according to the Campaign for Tobacco Free Kids, an anti-smoking group. Five other states and Guam tax packs of cigarettes at $3 or higher.

DeMarco and his group would want the revenues to fund "critical health care and public health needs." The General Assembly last increased the tax on cigarettes during a special session in November 2007. At that time it went from $1 a pack to $2 a pack and made Maryland's rate the 11th highest in the country.

Bruce Bereano, who represents some tobacco wholesalers said it is "pretty pathetic" that DeMarco is pursuing this increase. "It's just to keep him in business. It is just to keep him relevant."

Bereano added: "it is time for government to leave adult smokers alone. ... they are not ATM machines for government."

September 14, 2011

Senate panel hears transportation revenue ideas

Increases to the gas tax, higher vehicle registration fees and hikes to the titling tax were among the options discussed to raise transportation revenues during a lengthy hearing before the Senate Budget and Taxation Committee this afternoon.

The panel is examining ways to increase funding by $800 million a year for roads projects, an issue that's likely to be one of several budget related priorities in January when the General Assembly meets for its regular legislative session. The state legislature will also try to take another bike out of Maryland's persistent $1 billion structural deficit.

Lawmakers mostly kept their thoughts to themselves during the afternoon hearing, though some Republican lawmakers expressed discomfort with the pattern of state spending on public transit projects that benefit urban areas at the expense of rural road construction.

July 26, 2011

Senate committee gets sales tax lesson

A Senate committee today listened to the pros and cons of expanding Maryland's sales tax base to include more services, as well as goods purchased over the Internet.

Tangible products, but few services, sold by Maryland retailers are taxed at 6 percent. This year, the sales tax is predicted to generate $4.2 billion, about 30 percent of the state's general fund revenues, according to the Department of Legislative Services.

Legislative services analysts prepared a chart to show how much additional revenue the state could make by taxing engineering services, cable television, automobile repair, golf and other matters. If the state imposed a 6 percent tax on those and a dozen other services, it could bring in at least $1 billion more each year, the department estimated.

Taxing goods purchased over the Internet -- remote sales -- would bring Maryland another $184 million annually, one University of Tennessee study cited by legislative services showed. But an Internet sales tax is far more complicated, possibly involving federal approval.

Members of the Senate Budget and Taxation Committee hastened to say they are not considering expanding the sales tax base at the time, but they spent more than two hours on the topic at a hearing in Annapolis.

July 19, 2011

Comptroller won't support State Center project

Comptroller Peter Franchot told state agencies this week that he will not support the mega State Center project in its current form, citing concerns about the above-market rents the state has committed to paying and other issues.

The $1.5 billion project would redevelop the state government complex near Martin Luther King Jr. in midtown Baltimore over many years and several phases. A recent report by the Maryland Public Policy Institute calculated the redevelopment will cost more than $100 million in public subsidies -- a cost supporters say is outweighed by the benefits of redeveloping that part of town.

In a letter dated July 15, to General Services Secretary Alvin Collins and Transportation Secretary Beverley Swaim-Staley, Franchot writes:

"... I have voiced concern about the pragmatism of undertaking a commercial real estate venture of this magnitude in the midst of the worst economic climate since the Great Depression. I have questioned the efficacy of a project that has been billed as a model public-private partnership, but which could not survive in the absence of Maryland’s state government as the largest occupant, by far, of leased office space."

May 6, 2011

Montgomery Co. bag tax -- coming soon statewide?

This week, Montgomery County approved a 5-cent levy on paper and plastic bags, becoming the first Maryland jurisdiction to institute a "bag tax." But it likely won't be the last.

Already state lawmakers are laying the groundwork to expand the tax statewide. DC has had tax on disposable bags at food store since January 2010. The Montgomery County bag tax, which will take effect in January, extends to more kinds of retailers.

Prince George's County lawmakers pursued a bag tax earlier this year but couldn't get the legislation passed. Montgomery and Baltimore city and county are the only three areas with taxing authority; the 21 other counties need state legislative approval first.

The Baltimore City Council bagged a proposed bag tax in 2009. Councilman Bill Henry had sought a whopping 25-cents per bag -- a high enough number, he figured, to end the disposable bag addiction.

Bag taxes at the local level are spreading across the country, though the National Conference of State Legislatures noted in February that no state had instituted a statewide tax.

But perhaps even more troubling, according to David G. Lever, director of the state's Public School Construction Program, is a years-long pattern of county officials seeking less and less money. He said the drop in requests likely reflects inability to pay the local share of projects.

Here's what the 23 counties and Baltimore City have requested from the state recently:

Fiscal Year 2006: $593 million for 252 projectsFY07: $730 million for 410 projectsFY08: $894 million for 402 projects (peak)FY09: $871 million for 326 projectsFY10: $766 million for 283 projectsFY11: $729 million for 251 projectsFY12 (begins July 1): $612 million for 244 projects

(Photo of vacant land in Waldorf where St. Charles High School is to be built. By Sun photographer Barbara Haddock Taylor)

March 24, 2011

Alcohol tax increase advances to full Senate

For the first time in more than four decades, a Maryland legislative committee has approved an alcohol tax increase.

The Senate Budget and Taxation Committee today advanced a plan to bump tax on alcohol from 6 to 9 percent over the next three years. Alcohol taxes would go up by one percentage point per year.

Budget Chairman Edward Kasemeyer noted the historic nature of the committee's move, saying most Marylanders "probably wonder why it has taken so long."

If it wins general Assembly approval, the tax increase is expected to pump about $30 million into state coffers next year and $85 million once it is fully implemented. The House of Delegates has yet to vet the plan.

March 17, 2011

New alcohol tax idea emerges

Lawmakers have been weighing whether to raise the tax on alcoholic beverages since the first day of this year's legislative session. But the idea is getting a fresh look in recent weeks -- with a twist.

Health advocates recently learned that DC imposes a "special sales tax" on alcohol, charging an extra 3-4 percent on top of the regular 6 percent sales tax rate. Maryland, they argue, should follow the District's lead and develop its own special sales tax for alcohol.

The new proposal comes as the General Assembly is getting into the nitty gritty of Gov. Martin O'Malley's $14 billion general fund budget. Revenue increases are considered separately from the budget, but they generally go hand in hand.

Previously, efforts to increase Maryland's alcohol costs have focused on raising the excise tax, which is levied at the wholesale level. For decades, the excise tax on alcohol has been identical in DC and Maryland, and Maryland's liquor lobby said that changing it here could push consumers across the border to purchase in DC.

Liquor industry officials have testified in legislative hearings that wholesalers pass along the excise tax -- and a percentage markup -- to retailers. Then, retailers pass along that charge (and then some) to the consumer.

Until recently, alcohol tax advocates -- and lawmakers -- seemed largely unaware that DC also taxes at the consumer level. A sales tax increase would eliminate the mystery of how much wholesalers and retailers will mark up their products.

"For 20 years, it's been the most powerful argument, that we shouldn't mess up that equilibrium, said Vincent DeMarco, president of the Maryland Citizens' Health Initiative, who has long advocated for increasing the alcohol tax. "But as we now know, all along, DC has actually has a higher alcohol tax, erasing that argument."

Liquor lobbyists said they would prefer no tax increase at all, but said they were reviewing this latest proposal and see it as a sign that lawmakers are cognizant of competition along the borders.

March 15, 2011

House Republican leaders present alternate budget

Minority Leader Anthony J. O'Donnell told members of the House Appropriations Committee that the GOP plan "envisions a smaller, less intrusive state government." The proposal calls for a $621 million deeper cut than O'Malley's budget for the fiscal year that begins July 1.

Republicans would achieve that reduction by making major changes to how the state allocates K-12 education money and by and snipping at many state agencies and programs. At the same time, they'd cut the sales tax from 6 to 5 percent and the corporate income tax from 8.25 to 7 percent -- reductions that O'Donnell said would help lure taxpayers and companies to Maryland.

"We think it's a new vision," O'Donnell said.

House Republicans have also cast an eye toward the future, recommending the state hold spending growth to 2 percent over the next few years and bumping it up to 4 percent in fiscal year 2016.

January 3, 2011

How Maryland's deficit stacks up with other states

Maryland's lawmakers face a $1.6 billion deficit challenge when they return to Annapolis. As tricky as that might be, other states are in far more of a quagmire -- and are contemplating extreme decisions that would make many Marylanders queasy.

This weekend, we wrote about some of the budget-nipping options that Democratic Gov. Martin O'Malley is pondering as he puts together the fiscal 2012 budget, which lawmakers will then adjust in the three-month legislative session that begins next week. The possibilities in Maryland:

* A 5 percent across-the-board cut to K-12 education.* Increased hospital fees to support Medicaid.* State worker buyouts and layoffs to decrease state work force by at least 1,500.* Folding state agencies, including the Maryland Higher Education Commission.* Rethinking state worker pensions and health benefits.* Offloading 40 percent of teacher pensions to Baltimore City and counties.

Policy experts who track state budgets say Maryland is about in the middle of the pack when it comes to financial woes. Which states are worse off? The New York Times recently published a story about what it calls "the looming crisis."

"Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk."

November 11, 2010

Franchot talks of 'third way' to approach budget

Maryland Comptroller Peter Franchot says the state's $1.6 billion deficit is another sign that elected officials "have not adjusted to this new age of austerity."

Lawmakers yesterday learned that the budget hole is deepening. After a hopeful uptick in state revenues that posted over the summer, squeezing the gap to about $1.2 billion, spending on programs such as Medicaid has been higher than expected. And state revenues, as they stand now, aren't likely to recover to pre-recession levels anytime soon.

After the briefing by nonpartisan state analysts, Republicans worried the other party will push tax increases, and Democrats feared the minority party's counter offer would be draconian cuts to programs.

Franchot, who did not attend the legislative briefing, said in an interview yesterday afternoon that there's a "third way" -- a top to bottom review of state spending, estimated to surpass $15.5 billion next fiscal year.

November 10, 2010

State budget hole deepens

Maryland lawmakers will face a $1.6 billion budget hole when they return to Annapolis in January, state fiscal analysts are reporting today, a deficit larger than what they had anticipated earlier this fall.

An unexpected uptick in state revenue from fees and taxes, which the anlaysts reported in September, shrank the gap between income and expenses to about $1.2 billion. But greater spending on programs such as Medicaid has essentially erased that gain, said Warren G. Deschenaux, director of policy analysis for the Maryland General Assembly.

The Assembly’s budget committees will be briefed this afternoon on the latest deficit analysis.
Democratic Gov. Martin O’Malley, reelected last week, has said he is preparing a budget without any new taxes.

Asked how the the now-rising deficit would be addressed, O'Malley spokesman Shaun Adamec wrote in an email today that the governor “has repeatedly said that we will continue to be on a steady diet of cuts until we come through the other side of this recession.”

Business groups decry tax possibilities

Maryland business groups implored a commission reviewing the state's corporate tax structure to leave it alone. At that same hearing, last night in Annapolis, public interest groups asked the panel to recommend combined reporting as a matter of fairness.

The Maryland Business Tax Reform Commission, established in 2007, is to submit its report to the General Assembly in about a month. Lawmakers will review the panel's recommendations and could propose legislation establishing combined reporting or making other corporate tax changes. Last night's hearing gave the public a chance to weigh in, and dozens signed up to testify.

Combined reporting is one of the tax ideas bubbling up in Annapolis. Newly reelected Gov. Martin O'Malley and legislative leaders say the economy remains too weak to tap citizens and businesses for more state revenue, but other lawmakers are eyeing certain taxes. State officials also must close a budget hole of at least $1 billion. At a briefing today, legislators could learn that it's actually much larger.

November 8, 2010

Tax talk comes to Annapolis

The election now behind them, lawmakers and Gov. Martin O'Malley are returning to the business of running the state.

Committees of lawmakers will meet for four financial briefings this week in Annapolis: two on pensions, one about combined reporting and one in which they will learn the size of Maryland's budget hole. Some believe the gap could be as large as $1.7 billion.

Meanwhile, the Democratic governor said he is preparing a budget that includes no tax increases, and legislative leaders say the economy remains too weak to tap citizens for more revenue.

But some lawmakers have been open about their desire to increase certain taxes. This weekend, The Sun examined some of the chatter. We focused on six possibilities: the alcohol tax, the gas tax, sales tax on services, combined reporting for businesses, property tax and pension fixes that could translate to higher local taxes. O'Malley has not said whether he would veto such tax increases.

The briefings this week could serve as coming attractions for the General Assembly's 2011 90-day session, which begins in about two months.

September 24, 2010

O'Malley wants more details on Ehrlich's Roadmap

Gov. Martin O'Malley's campaign deployed an on-line only commercial Friday calling out Robert L. Ehrlich Jr. for failing to provide details about how he will pay for some of his campaign promises.

The big ticket items include repealing a penny from the sales tax, ending furloughs for state workers, returning road construction funds to the locals and exempting military retiree pensions from the income tax. A conservative estimate of the cost is $766 million. (In order: $600 million + $64 million + $60 million + $42 million).

Its true that Ehrlich hasn't said how he'd pay for those ideas, and the commercial is fashioned around a response Ehrlich gave after reporters asked about that. He said: "The more detailed proposals will have to wait for later in the campaign, and quite frankly, for November 3rd." The general election is Nov. 2.

Ehrlich's response is played twice during the ad along with tape from news reports pointing out that Ehrlich hasn't accounted for the costs. O'Malley's team then takes a shot at Ehrlich, saying "Nov. 3 is too late to reveal plans to voters."

Ehrlich camp didn't reply to the substance of the spot, but threw the ball back to the governor. “Martin O’Malley’s hypocrisy has no limits," said Ehrlich campaign spokesman Henry Fawell. "Martin O’Malley refuses to be honest about how he will pay for his own campaign commitments."

Fawell lists "$8 billion in deficits" and "$3.6 billion in mass transit commitments" as O'Malley unpaid plans. The $8 billion figure came from January estimates, though a more current budget document shows the math really comes to $6.1 billion. By that same measure, Ehrlich left O'Malley with projections for $4.5 billion in deficits when he left office.

The transit commitments refer to the projected costs for building the Purple Line light rail connecting Montgomery and Prince George's counties plus a planned Red Line running east-west in Baltimore. O'Malley has said that he would not move forward with those projects unless the feds kick in about half of the funds. But, with the state pushing against its debt levels, it is unclear how the second half would be funded.

September 1, 2010

Comptroller releases annual MD revenue report

Maryland pulled in less revenue than almost any time in four decades -- but outperformed its bleak financial forecast, state Comptroller Peter Franchot reported this morning.

The state's revenue collections, which include sales and property taxes and various fees, amounted to $12.6 billion in the fiscal year that ended June 30, representing a year-over-year decline of 3.7 percent, Franchot said.

But because financial analysts had predicted an even more dramatic decline, the state actually ended the year with $183.7 million more than projected. The state ended the year with a fund balance of $344 million (the unexpected money plus planned transfers), which, by law, goes into the state's rainy day fund.

Franchot summarized the report this morning at the Board of Public Works, a three-member panel of Democrats that also includes Gov. Martin O'Malley and Treasurer Nancy Kopp.

It was a striking contrast from last year, when lower-than-anticipated revenues prompted the board to slash spending to bring the state budget into balance.

August 6, 2010

Feds likely to help with state Medicaid bill after all

The U.S. Senate on Thursday passed a $26 billion package that includes some of the Medicaid funds Gov. Martin O'Malley relied upon to plug a $389 million hole in this year's budget.

The deal still must be approved by the U.S. House of Representatives, but House members have been far more supportive than the Senate. It is unclear how much Maryland will eventually get, since the package is smaller than the initial plan. ((**UPDATE** O'Malley spokesman Shaun Adamec writes in to say that the current language provides Maryland with $272.7 million.))

Nevertheless, any money from the feds will reduce the amount O'Malley will need to borrow from the income tax reserve fund and will leave whoever wins in November with a healthier cash balance.

O'Malley has taken some flak from the conservative Americans for Prosperity for offering a budget that relied on federal money. Dave Schwartz, the group's executive director, said the issue has surfaced at budget-themed town hall meetings and he questioned the governor about it during a recent Board of Public Works meeting.

Schwartz said their group is keeping an eye on what Congress does, and is still annoyed with the governor. "This is just not how you balance budgets," he said. "People at home don't balance budgets on what might come through."

The Senate, apparently also worried about Congress balking on the promised money, inserted a budget provision that allowed the state to borrow from the income tax fund to keep Maryland's spending plan balanced. Other states, including New York, face wide-spread layoffs if the money does not materialize.

August 2, 2010

Competing claims complicate comparisons

In the first television advertisement of his reelection campaign, Democratic Gov. Martin O'Malley invited viewers back to his first year in office. Faced with a deficit left by Republican Gov. Robert L. Ehrlich Jr., the spot said, O'Malley was forced to cut spending.

Ehrlich, now running to win his job back, remembers the transition differently. He says he handed his successor a billion-dollar surplus — money Ehrlich says O'Malley then frittered away, before passing a historic tax increase.

So who is telling the truth?

Baltimore Sun colleague Annie Linskey reports that both are — up to a point. Ehrlich did set aside extra funds. But he also left the new governor with spending and revenue forecasts that were out of balance. In the end, O'Malley used the surplus to plug the hole.

The competing claims illustrate the difficulty confronting voters hoping to compare the candidates' records. But the electorate has good reason to examine past decisions: Whoever wins in November will face a $1.6 billion budget gap.

In fact, O'Malley, a Democrat, and Ehrlich, a Republican, have used many of the same tools. Both increased spending. Both covered shortfalls by shuffling money from one account to another. When recessions caused fortunes to ebb, both went to the Board of Public Works to cut spending, and both relied on federal funds and increased taxes and fees.

July 29, 2010

Open mic day at Board of Public Works

Wedged between approvals to purchase land for Program Open Space, a complex lease deal for a new development in Baltimore and a state bond sale, David Schwartz of Americans for Prosperity appeared before Gov. Martin O’Malley Wednesday at BPW to rankle him about budget decisions.

Schwartz, who used to raise money for former Gov. Robert L. Ehrlich, told O’Malley that members of his Tea Party organization “were pretty unhappy” that this year’s $32 billion state budget relies on $389 million in promised federal funding. Congress is now wavering on that commitment and may not deliver the help.

“We are running a deficit right now,” Schwartz said. “When is that getting taken care of and how is getting taken care of?”

O’Malley explained that the budget contains a contingency plan for this exact possibility: Borrow another $200 million from the income tax reserve fund and use the cash balance to cover the rest.

Schwartz disliked the answer: “So we are raiding the local income tax [fund] again?” he asked. The income tax reserve fund has become the new go to account to fill budget holes. O’Malley used it last year and this year.

The governor appeared uncomfortable with the line of questioning: “No. I wouldn’t. No. That’s not. …”

Treasurer Nancy Kopp piped in with the news that state revenues are higher than expected, inflating the cash balance and making it less likely that the state would need to borrow from the income tax fund.

July 21, 2010

Bartlett joins congressional Tea Party caucus

While there appears to have been some confusion about who is and who is not a member of the new House Tea Party Caucus, Rep. Roscoe G. Bartlett is making his position clear: The Western Maryland Republican announced Wednesday that he has joined the group.

“I have been cheered at every Tea Party event that I’ve attended because I’m one of only 18 members in Congress who has voted against every bailout bill,” Bartlett said in a statement.

Rep. Michele Bachmann introduced the new caucus Wednesday in Washington with a list of 28 members, including Rep. Joe Wilson, the South Carolina Republican who shouted “You lie!” as President Barack Obama gave a speech before a joint session of Congress, and Rep. Joe Barton, the Texas Republican who apologized last month to BP for its treatment by the Obama administration following the Gulf of Mexico oil spill.

July 15, 2010

Maryland keeps triple-A bond rating, but ...

The three top rating agencies affirmed Maryland’s long held AAA bond status for an upcoming sale, though Moody’s, which is widely viewed as the most reliable of the three, had terse words for the state’s fiscal leaders.

Moody's analysts called the state’s depleted retirement system a “credit challenge.” The $33 billion system has 65 percent of the funds needed to meet future obligations, and the analysts concerns echo a sentiment raised in February by The Pew Center on the States. (See Jay Hancock story on the Pew report after the jump.)

Moody’s ominously pointed out that Maryland’s retirement system is funded at “a lower level than most similarly rated states.” Moody’s noticed that a proposal to ease the state’s teacher pension burden failed in the General Assembly this year. That idea terrified the cash poor counties because they would have had to pick up some millions in costs.

The rating agency also noted what they called the state’s “high” debt levels – a theme that former Gov. Robert L. Ehrlich is likely to hit in his bid to recapture his old job. Maryland has the 14th highest per capita debt, according to Moody’s. But the debt is still within state-set guidelines and Maryland’s law requires paying outstanding bonds in 15 years, a snappier pace than most states.

June 29, 2010

A balanced budget, but trouble ahead?

After months of rancorous debate, the search for a solution to Baltimore's $121 million deficit draws to a close this week without the sweeping layoffs or deep service cuts that officials had threatened.

A budget represents a "snapshot of the next year," not a "strategic plan," said Donald Fry, head of the Greater Baltimore Committee. He said officials should seize the lull after the budget's passage to draft a long-term roadmap for economic development.

Economist Anirban Basu, CEO of the Sage Policy Group, sounded a note of alarm over an increase in the income tax, which nearly doubles the disparity between rate in the city and that of Baltimore County.

"I've never seen such a stealth income tax increase in my life," said Basu, who warned that the hike could dissuade those considering a move to the city or prompt residents to leave.

"The city took two steps back when it only needed to take one step back," he said.

June 24, 2010

Congressman's son 'forgot' about some payments to girlfriend

Western Maryland Del. Joseph Bartlett told the Frederick News-Post he had "forgotten" that he charged taxpayers for a 21-day stay in 2007 in the Annapolis home of his now girlfriend.

Bartlett, the son of U.S. Congressman Roscoe Bartlett, has draw criticism for using public money to pay his girlfriend rent during the 2008, 2009 and 2010 legislative sessions. But public documents released Wednesday show the living arrangement began earlier.

"Delegate Joseph R. Bartlett was an occupant at my residence on the nights of October 29 to November 3rd during the Special Session," wrote Katharine Hopkins in a 2007 letter to the legislative accounting office. "I respectfully request payments for 6 nights at $123 per night."

The state wrote Hopkins a check for $738. In total, the state has paid Bartlett's girlfriend $31,923 for rent. Senators and delegates are allowed to charge the state for rent or hotels when the General Assembly is in session. Many stay in local hotels.

Bartlett, a Republican, has said he started dating Hopkins in Spring 2008 and has said he sought permission from a state ethics attorney to continue his rental arrangement with Hopkins after the romance began. Bartlett has not returned numerous calls for comment. Hopkins also has not returned calls.

Documents released Wednesday show the state also paid Hopkins $11,193 for 91 days rent in 2008; $9,072 for 72 days rent in 2009 (Bartlett stayed in a hotel other nights) and $10,920 for 91 days in 2010.

June 23, 2010

Ehrlich would boost credit for film, TV productions

Republican former Gov. Robert L. Ehrlich Jr. said Wednesday that he would lure television and film productions to Maryland by expanding a state tax credit that has been cut since he left office.

After meeting with film and television industry reprsentatives in Hunt Valley, the onetime actor -- he made a cameo appearance as a State House security guard in "The Wire" -- said he would budget $7 million for the film production tax credit that was created during his administration.

The state budgeted $6 million for the tax credit under Ehrlich; the current figure is about $1 million. As a result, the Ehrlich campaign said Wednesday, no major production has come to Maryland in three years.

“Unemployment has doubled in Maryland since 2006 and little has been done by the O’Malley Administration to turn the economic tide,” Ehrlich said in a statement. “Cutting this tax credit is no different than cutting jobs. We all benefit from the jobs production companies bring to Maryland, and the money they spend on salaries, hotel rooms, restaurant meals, transportation, security, even dry cleaning and entertainment. It’s an expenditure that produces a huge return on a small investment, and we ought to return Maryland to the forefront of TV and film production. When I’m governor, we will.”

His campaign quoted a Sage Policy Group report indicating that the industry generated $158 million in direct and indirect economic impact to the state in 2006.

A campaign spokesman for Democratic Gov. Martin O’Malley referred questions to the state Department of Business and Economic Development. Hannah Byron, the assistant secretary of business and economic development for tourism, film and the arts, said it was the legislature that cut the tax credit.

Byron said the $6.8 million that O’Malley requested for fiscal year 2008 was cut by the legislature to $4 million, and the $2 million he requested for fiscal 2010 was cut to $1 million.

“There have been some pretty difficult budget decisions that needed to be made,” Byron said. “The administration has been willing to commit additional funds in order to secure productions that would have a significant employment or economic impact. Unfortunately, none of those productions have come to fruitition, for a number of reasons.”

June 21, 2010

Council expected to back 2-cent bottle tax

From City Hall, the Baltimore Sun's Julie Scharper reports that the City Council will vote Monday night on a 2-cent tax on bottled beverages, to expire after three years.

City Hall sources say Councilwoman Helen Holton, who last week helped to defeat the 4-cent bottle tax backed by Mayor Stephanie Rawlings-Blake, has agreed to support the more modest measure following a meeting Monday afternoon with the mayor.

Having voted against the 4-cent tax last week, Holton may file a motion to reconsider it on Monday night. The council is expected to amend the measure, cutting the tax in half and adding the sunset date, and approve it Monday night in a preliminary vote. A final vote would be held later this week.

Rawlings-Blake and the council have been negotiating the mix of new taxes and service cuts needed to close a $121 million budget gap by the end of the fiscal year June 30.

The 4-cent bottle tax, which officials say would have generated $11.4 million, failed last week when the council deadlocked 7-7. It is the only revenue-raising measure proposed by Rawlings-Blake that the council has not approved.

In Baltimore, more pension tension

Baltimore Sun city hall reporter Julie Scharper writes:

Nearly forgotten in the hoopla over the failure of the bottle tax at last week's city council meeting was an issue with potentially larger reverberations: the fire and police pension system. A bill that would radically alter the pension plan and save the city $65 million escaped a final vote last week but is scheduled to be considered tonight.

Councilwoman Mary Pat Clarke plans to offer a series of amendments to the pension bill on behalf of the police and fire unions at tonight’ meeting. The amendments would grant all fire and police retirees an annual cost-of-living increase of 2 percent. Unamended, the current legislation gives retirees over 55 would a 1 percent increase and those over 65 2 percent.

It should be noted here that Councilman Bill Cole recently introduced a bill to reform the elected officials’ pension system that would boost their cost-of-liivng increase from 2.5 percent to 2.8 percent, so a 2% increase for police and fire retirees does not seem out of the question.

It is unclear how many council members will support the amendments, but Clarke hopes that they could help stave off a lawsuit. The Fraternal Order of Police and the firefighters' union filed a lawsuit in federal court a couple weeks ago charging the city with “knowingly underfunding” the pension plan over the past decade.

Mayor, supporters still lobbying for city bottle tax

Baltimore Sun city hall reporter Julie Scharper writes:

Today marks not only the longest day of the year, but also the longest council meeting of the year. After months of wrangling, the Baltimore City Council finally will pass a final version of the city’s budget tonight through a complicated series of meetings and hearings likely to last several hours.

What is still not known is the fate of the bottle tax. As of this afternoon, city officials were still attempting to persuade council members to resurrect the four-cent tax, which was efectively killed by a tie vote last Thursday. The council could revisit the issue if a member who voted against it asks for it to be reconsidered. The administration, which estimates that the tax could generate $11 million in revenue and reverse cuts to many programs, especially public works, continues to lobby for the tax.

Councilman Warren Branch voted against the tax last week, surprising many in City Hall who thought he would support it because he was a long-time public works employee and a former leader in the AFSCME union, which has supported the tax. On Friday, Branch told city officials that he would not budge on the tax, snuffing the hope that he would be the one to bring it back.

But fans of the tax hold out hope that one of the other council members who voted against it — Helen Holton, James B. Kraft, Belinda Conaway, Agnes Welch, Nick D’Adamo or Bill Henry — would ask for it to be reconsidered at tonight’s meeting. Kraft sent an e-mail to constituents detailing why he was not backing the tax and said today he remains firm.

However, several water advocacy groups have criticized Kraft, one of the most environmentally conscious council members, for not supporting it because Mayor Stephanie Rawlings-Blake says some of the proceeds will be used to maintain trash-skimming operations in the Harbor. In his letter, Kraft opines that it would be unlikely for the mayor to discontinue such an important and high-profile service during an election year.

June 17, 2010

Bottle tax comes up short; city to cut services

The City Council failed Thursday to approve a controversial new tax on bottled beverages, leaving the city to cut services to close a budget gap, Baltimore Sun colleague Julie Scharper reports.

The 15-member council split 7-7 on the measure backed by Mayor Stephanie Rawlings-Blake but opposed by a coalition of beverage of distributors and store owners. Council President Bernard C. “Jack” Young, whose cousin is a lobbyist for a beverage distributor, recused himself.

Supporters of the new tariff had lobbied furiously this week to win the support of two remaining swing voters to achieve an 8-6 majority. Council member Warren Branch, who had said Wednesday that he was undecided, voted against it Thursday.

“My constituents told me overwhelmingly to vote no,” he said.

Councilman Carl Stokes, the other undecided member, voted for it Thursday.

City bottle tax in doubt

The controversial bottle tax backed by Baltimore Mayor Stephanie Rawlings-Blake to help close $121 million budget gap is in doubt after a key city councilman said he was leaning against voting for it on Thursday, Baltimore Sun colleague Julie Scharper reports.

Councilman Carl Stokes, seen as a swing vote on the proposal, said late Wednesday that he does not agree with Rawlings-Blake's plans for the proceeds of the tax on bottled beverages.

Stokes said the revenue should save more jobs than the 70 that Rawlings-Blake says it will preserve; the mayor wants to use the money to restore street-cleaning and sanitation programs, among other initiatives.

"I don't have a reason to vote for the bottle tax," Stokes told Scharper. "If I had a reason, like more jobs and fewer furlough days, I'd vote for it."

A Stokes vote against the tax would likely lead to a 7-7 tie, resulting in its defeat.

The proposed tariff is one of several taxes and fees on which council members are scheduled to vote Thursday at an emergency meeting to help close the city's $121 million budget shortfall before the current fiscal year ends in less than two weeks.

June 10, 2010

Next year's budget woes

There’s an increasing amount of chatter in Annapolis about the possibility Congress might put the brakes on an expected $24 billion stimulus extension that Gov. Martin O’Malley and other governors are counting on to balance state budgets.

O’Malley et al do have a back-up: Should the $389 million Maryland expected from the federal help fail to materialize, the state would likely draw down the fund balance and dip again into the once-obscure income tax reserve fund.

“We’d rather not have to do that,” O’Malley said this morning after appearing at a ribbon cutting for a new waterfront Morgan Stanley building in Fells Point. “That is our contingency plan. It is not one that we want to have to resort to.”

The governor borrowed $366 million from the income tax reserve fund to balance this year’s budget and another $350 million for the budget year that starts July 1. A Senate added provision to the budget calls on the state to take an additional $200 million from the fund if the federal help does not arrive. The plan reduces the likelihood that O’Malley will need to go to the Board of Public Works seeking more cuts during an election year.

O’Malley warned that next year’s fiscal picture outlook is still tough. “We’re already putting together a preliminary budget for the next fiscal year. It is challenging.”

The governor mentioned the layoffs. “Your next question is how many would you lay off?” O’Malley said. “We hope not to layoff. We hate furloughs but we hate layoffs worse.”

Gov. Martin O'Malley's spending plan assumes the state gets $389 million in federal relief from that package. But, as The Times points out, the House of Representatives killed the measure in late May. The Senate can put the money back -- but the clock is ticking. Maryland's budget year begins in less than 30 days.

O'Malley is not worried, says Shaun Adamec, a spokesman. The governor is monitoring the legislation and is "confident" that the Medicare aid will be included in when the final version of an unrelated bill.

What happens if Congress doesn't provide the help? State senators who scrutinized $13 billion operating budget during the most recent General Assembly session fretted over that same question and came up with an answer: If federal aid does not materialize, the state will borrow an extra $200 million from the until-recent-times-obscure income tax reserve fund. The rest comes from the fund balance.

This seemingly bottomless fund is an account that O'Malley has raided in the past to stave off deep cuts. He proposed taking $366 million from it in FY09. He borrowed $350 million for FY10. If the Senate provision is triggered by Congress failing to act, the state could wind up borrowing $750 million from the account this year alone.

The Times reports that at least 30 states took the same budgeting tack O'Malley chose and are relying on the Medicaid aid -- which could mean the federal aid package is Too Big To Fail. For example, the paper quotes PA Gov. Ed Rendell threatening to layoff 20,000 state workers if federal help is not forthcoming. Other governors, it appears, just wouldn't even speculate.

June 7, 2010

Ehrlich details small-business strategy, UPDATED

In the first major policy unveiling of his campaign, former Gov. Robert L. Ehrlich Jr. this morning announced a "small-business initiative to help revitalize Maryland's economy."

The Republican said he would move immediately to change the "attitude about entrepreneurship," which he said has suffered under the administration of Gov. Martin O'Malley, the Democrat who unseated him four years ago.

Nearly all of Ehrlich's proposals involved the formation of commissions. Ehrlich made his first announcement of the day at a pizza restaurant in Gaithersburg. He'll hold a similar talk this afternoon at a crab house in Reisterstown.

June 2, 2010

Ehrlich to discuss business agenda

Gov. Robert L. Ehrlich Jr. will soon unveil a plan that he says will help Maryland's small-business sector. At a campaign stop Wednesday, the Republican candidate told a group of Carroll County business owners that he will announce "major initiatives" in the next seven to 10 days.

Ehrlich is trying to unseat Gov. Martin O'Malley, the Democrat who ousted him four years ago, in part by convincing voters that Maryland's business climate has suffered under the current administration. O'Malley argues that he has fought to retain and create jobs in a terrible national economic downturn. Maryland's unemployment rate, while higher than in previous years, has stayed below the national average.

Ehrlich told the supportive Carroll County group, gathered at Dean's, a family-owned restaurant in Hampstead, that he would work to make state regulators more understanding and reachable. He said many employers have complained of regulators who seem "out to get them," a comment that prompted the half-dozen in the room to nod vigorously.

Ehrlich also repeated his pledge to repeal the penny-per-dollar sales tax increase that O'Malley signed into law, and he again criticized the state's corporate tax rate, which he says is too high.

His small-business plan, Ehrlich told reporters after the event, includes a mix of policies that worked during his 2003-2007 term as governor, the successful practices of other states and ideas culled from campaign stops like the one in Hampstead. He declined to provide specifics, saying he was saving them for the official announcement, which he said would likely be at a small business.

May 5, 2010

O'Malley named 'BIO Governor of the Year'

Gov. Martin O'Malley is in Chicago today to receive an award from a Biotechnology Industry Organization (BIO) for his work in promoting the emerging industry in Maryland. The group noted the governor's biotech tax credits in choosing him.

Maryland is home to 500 bioscience companies and 50 research-intense federal institutes and centers, according to O'Malley aides, and the governor has made biotechnology growth one of his priorities.

The state has dedicated about $100 million in the past two years to BioMaryland initiatives. Another $70 million has been earmarked for science and technology related infrastructure at state universities and community colleges, O'Malley's aides say.

O'Malley has done "an exemplary job enhancing and expanding Maryland’s stature as one of the nation’s most vibrant biotech clusters,” BIO President Jim Greenwood said in a statement released by O'Malley.

While at the national biotechnology conference in Chicago, O'Malley, who is among 400 Marylanders in attendance, will promote the state's biotechnology assets.

March 18, 2010

House joins Senate in approving civil filing fee bump

The House of Delegates this morning approved raising the cost of filing a lawsuit -- money that would be used to support civil legal services for the poor. Lawmakers this year have looked to fees as a way to fund social programs hard hit by the economy.

The House plan is more moderate than what the Senate approved earlier this month. Delegates want to charge $130 for Circuit Court filings, instead of the $105 they now cost. (The Senate approved raising the cost to $150.) Under the House plan, District Court filing fees would go up by $7 or $15, compared to the $10 or $20 increase approved by the Senate.

Delegates also demanded more financial reporting from Maryland Legal Services Corp., the recipient of the additional fees, and want the increases to end after three years. The two proposals must be reconciled before the 90-day legislative session ends April 12. Del. Luiz R.S. Simmons, a Montgomery County Democrat, warned his colleagues that he will not support the Senate plan. Other delegates, including House Minority Leader Anthony J. O'Donnell of Calvert County, opposed even the moderate fee increase.

O'Donnell said it's unfair to "nickel and dime citizens" in the midst of a bad economy, regardless of the cause that money supports.

The court fees would be used to prop up legal assistance in foreclosure filings, child custody battles and landlord-tenant disputes -- civil cases where poor people are not entitled to a lawyer, unlike in criminal cases.

Legal aid revenue has been walloped even as those services are more in demand than ever, advocates say. A traditional source of funding -- interest accrued on lawyers' trust accounts -- is quickly drying up because interest rates are so low. Maryland Legal Services Corp., which distributes money to about three dozen free legal clinics across the state, estimates interest this year will generate about $2 million for them, down from $6.7 million in 2008.

The House plan would provide about $4 million in new money for legal services, delegates said.

Other court fees, including extra charges for divorce petitions in Prince George's County and marriage licenses in Baltimore City, are under consideration this year. Revenue from those increases would be used to support domestic violence programs.

March 15, 2010

“Don’t cut that!” says McFadden

This afternoon Senators on the Budget and Taxation Committee voted rapidly on hundreds of line items in Gov. Martin O’Malley’s spending plan, making about $150 million worth of cuts.

Following along involved flipping between three different documents, straining to hear of legislative services analysts and trying to parse whether the body had said ‘yes’ or ‘no.’

Keeping up required concentration. But it looked easy for Senator Nathaniel J. McFadden, a Baltimore Democrat.

When the Child First Authority came up for a vote, he objected to a $119,187 reduction. “Chairman, I’d like to keep this money,” McFadden said. “The program provides valuable services in the city.” Done. Money kept.

Later the Fine Arts grants were on the chopping block, McFadden raised his voice again. “They are essential,” McFadden said. Instead of a $1.1 million cut, the committee acquiesced and only took $600,000.

He also led opposition to a $250,000 cut to Executive Branch agencies (cut rejected).

And he did not like a $1.1 million cut to the Graduate and Professional Scholarship program. “We have to leave some money in there,” McFadden said. (Full disclosure: That one went by so quickly, we aren't completely sure what the committee did.)

March 1, 2010

Maryland Chamber now supports unemployment benefits changes

Gov. Martin O'Malley's proposed changes to unemployment benefits have at last won the support of key business groups.

The Maryland Chamber of Commerce just released a statement saying its legislative policy committee had voted this afternoon to back a heavily amended version of the Democratic governor's plan. The amendments resulted from lengthy negotiations among lawmakers, the administration, business groups and labor and were largely designed to appease groups, such as the Maryland Chamber, that had been concerned about long-term costs to employers.

Until today, the Maryland Chamber of Commerce and other business groups had opposed the legislation. Now, the Maryland Retailers, Associated Builders and Contractors and Maryland restaurateurs back the bill, though the National Federation of Independent Businesses continues to oppose it because it doesn't provide any tax relief.

Chamber President Kathy Snyder said in a statement:

"Our goals have been to give employers payment plan options, offset the cost of any unemployment insurance system changes and ensure the long-term health and stability of the unemployment insurance trust fund. This bill accomplishes those goals."

With additional support now secured, the Senate Finance Committee will likely vote on the proposal tomorrow. The House of Delegates will then take up the amended bill.

Sen. Thomas M. Middleton, a Democrat and chairman of the committee, said he was "very pleased" with the outcome. "After all of the compromise that took place, I felt very optimistic," Middleton said. He led the weeks-long negotiations.

Middleton said he and the O'Malley administration are now working on a plan to help small businesses by developing loan guarantees for employers who will be hard hit by this year's dramatic increase in unemployment-insurance taxes.

If lawmakers pass the amended plan, which broadens the number of people eligible for unemployment benefits by shifting the time period that can be considered when calculating them, the state will be eligible for about $127 million in federal money.

That cash will be deposited into the state's unemployment insurance trust fund, which has been depleted by the high number of people collecting and businesses that have gone under. The governor originally wanted to use that money to provide tax relief to employers, but the Maryland Chamber of Commerce and other groups wanted to keep the money in the trust to build it back up.

To offset the long-term costs -- about $20 million per year -- associated with accessing the federal money, other benefits will be nipped. Among them: eliminating sick claims, increasing the minimum weekly claim to $50 (which knocks off a few of the lowest end claimants), increasing the penalties for misconduct and decreasing the amount of money an unemployed person can make while collecting benefits.

February 26, 2010

Signing bonus ... for employers

The state Senate today approved a plan to give businesses a $5,000 tax credit for each unemployed Marylander they hire. Lawmakers went beyond the $3,000 Gov. Martin O'Malley had proposed.

The tax credits are limited to $250,000 per employer, and the state will cut off the program at $20 million. The legislation also accounts for potential problems by requiring the new employee to be filling a new position or one that has been vacant at least six months.

O'Malley said in a statement the plan serves two purposes, "creating jobs and protecting the small and family owned businesses that are the backbone of our economy and the driving force for job creation."

The House of Delegates must vote on the proposal, but leaders there believe it has the support to pass.

Annie Linskey covers state politics and government for The Baltimore Sun. Previously, as a City Hall reporter, she wrote about the corruption trial of Mayor Sheila Dixon and kept a close eye on city spending. Originally from Connecticut, Annie has also lived in Phnom Penh, Cambodia, where she reported on war crimes tribunals and landmines. She lives in Canton.

John Fritze has covered politics and government at the local, state and federal levels for more than a decade and is now The Baltimore Sun’s Washington correspondent. He previously wrote about Congress for USA TODAY, where he led coverage of the health care overhaul debate and the 2010 election. A native of Albany, N.Y., he currently lives in Montgomery County.

Julie Scharper covers City Hall and Baltimore politics. A native of Baltimore County, she graduated from The Johns Hopkins University in 2001 and spent two years teaching in Honduras before joining The Baltimore Sun. She has followed the Amish community of Nickel Mines, Pa., in the year after a schoolhouse massacre, reported on courts and crime in Anne Arundel County, and chronicled the unique personalities and places of Baltimore City and its surrounding counties.